Breach of contract on sales of goods can only occur if the sale involves a legally binding purchase contract between a buyer and a seller. Purchase agreements can be absolute or conditional, meaning they may place no restrictions on the buyer or may include conditions such as a buyers’ ability to qualify for a loan. Breach of contract occurs when either the buyer or seller doesn’t honor the terms of the agreement, regardless of whether it’s absolute or conditional. Repudiation is an example of a breach of contract on sales of goods where a non-breaching party can sue before scheduled date of delivery.

Conditions

Repudiation -- also called an anticipatory breach -- occurs when one party makes it clear they don’t intend to follow through on the terms of a purchase contract agreement. It makes no difference when the sale is supposed to take place or whether the refusal occurs through words or actions. Once the other party becomes convinced the sale of goods won’t take place, he can immediately file a breach of contract lawsuit and ask for payment or delivery of the product. Repudiation can occur in one of three forms, each of which is as serious as the next.

Express Repudiation

Express repudiation is a clear, upfront and unconditional refusal to follow through with the terms of a purchase agreement. A statement that includes ambiguities or qualifiers may be a red flag warning but isn’t an express repudiation. For example, an oral or written statement such as “There’s no way I’m going to buy this piece of equipment” or “I will not be delivering this piece of equipment as promised” are examples of express repudiation that can come from either a buyer or a seller.

Repudiation by Action

Repudiation can also occur by the actions or inaction a buyer or seller takes. Conduct that makes it clear the sale can’t or won’t be taking place constitutes repudiation by action. For example, if a buyer signs a purchase agreement for a piece of equipment but finds the same item at a lower cost and purchases it from another seller instead, the buyer is committing repudiation by actions and the seller has a right to sue for breach of contract.

Repudiation by Transfer

Repudiation can occur without one of the parties even being aware that it’s happening. Repudiation by transfer is most often a consequence of a seller transferring a purchase contract to a third party. Assume, for example, a buyer signs a purchase agreement to purchase a piece of equipment the seller originally leased and is selling because the lease is ending. If before taking delivery the seller transfers ownership of the equipment -- and the buyers purchase contract -- to the lessor, the buyer isn’t purchasing the equipment from the party named in the agreement and repudiation by transfer has taken place.